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Prohost Biotech - Wednesday, July 24, 2013

The moment some investors learned that ILLUMINA (ILMN) might acquire Advanced Liquid Logic (ALL), they debated selling the stock without knowing anything about the acquired firm or the advantages Illumina will add to its technological capability by acquiring it. Is this not the rule of thumb made possible by the power of computers’ programing? ILMN was already down anyway for the day, losing $0.95 during the bad NASDAQ day for the biotech sector in general. Long-term serious investors who are lured to sell ILMN must have felt bad when they heard the news after the end of Monday trading day.    

Regarding the firm, Advanced Liquid knowledge (ALL), which has become wholly owned subsidiary of Illumina, it, indeed, complements Illumina’s technologies with its proprietary “digital microfluidics” technology. This technology is based on electro wetting that precisely manipulates small droplets within a sealed disposable cartridge to perform complex laboratory protocols. The know-how and rationale have been validated and will surely enable Illumina to deliver the simplest and most efficient sample-to-answer next-generation sequencing (NGS) workflow, an advancement that contributes to the greatness of the unique development of gene analyzers.  

Here is what Christian Henry, Senior Vice President and General Manager of Illumina’s Genomic Solutions business had to explain, “For our research customers, ALL’s technology will further streamline the industry's simplest NGS workflow, while for clinical and applied markets, where ease of use and consistency are especially valued, it will allow the firm to offer integrated, end-to-end solutions. ALL brings an impressive intellectual property (IP) portfolio in digital microfluidics and a talented team with a track record of innovation.”

Indeed, the next goal Illumina had delineated is to provide customers with tools to go from biological sample to answer quickly and easily, minimizing the risk of errors and reducing hands-on time in the lab. Illumina has recently announced it is collaborating with leading vendors of liquid handling robotic platforms to make automation solutions for high-throughput sample preparation more accessible. With its new acquisition, Illumina will be able to introduce similar benefits to its low- and mid-throughput customers.

The application of the acquired firm’s technology includes nucleic acid isolation from various sample types and library for next-generation sequencing. Its robust solution has a clear advantage in precisely handling low sample volumes, which is an increasingly important focus for customers.

What happened next?

Minutes after the Market closed, ILMN rallied, adding over $4.25 to its declined price. The rally came when high-tech analysts were waiting for the firm’s 5 o’clock conference call about its quarterly financial results. They had already guessed that the firm’s revenues and income might have exceeded their own optimistic expectations. Indeed, Illumina’s revenues and profits exceeded Wall Street’s expectations. Growth was the analysts’ request and growth is nothing but selling more through innovation. Illumina, has, indeed, outperformed itself.  

The net income rose to $35.9 million, or 26 cents per share, from $23.4 million, or 18 cents per share, a year earlier as it booked fewer charges and posted a large increase in product and service revenue. Earnings Per Share (EPS) increased 7.5% to $0.43 in the quarter versus EPS of $0.40 in the year-earlier.  Revenues rose 23.33% to $346.09 million from the year-earlier quarter, beating mean analysts estimates of $331.77 million.

About now and tomorrow, Illumina’s President and Chief Executive Officer Jay Flatley confirmed that the firm’s business is showing strong trends globally and that the 2013 strategic initiatives for robust long-term growth are progressing as planned.  

Illumina’s technological achievements and its incessant improvements on its analyzers’ capabilities are the major engines behind the huge evolution of the biotech industry, the clinical methods, the discoveries of the origins of intractable diseases, development of treatments that act at the root-cause of illnesses, development of targeted therapeutic molecules and the practice of personalized medicine.   

Are we there already? Maybe not yet, but the fact is that what biological sciences have achieved in the past decade has exceeded, by far, what sciences have brought to the world in the past 500,000 years. The engines behind the life sciences recent revolutionary evolution, which are made possible by Illumina’s creativity, make us more comfortable than ever about the future.

We are long ILMN.

FORWARD-LOOKING: Material presented here is for informational purposes only. Nothing in this article should be taken as a solicitation to purchase or sell securities. Before buying or selling any stock you should do your own research and reach your own conclusion. Further, these are our 'opinions' and we may be wrong. We may have positions in securities mentioned in this article. You should take this into consideration before acting on any advice given in this article. If this makes you uncomfortable, then do not listen to our thoughts and opinions. The contents of this article do not take into consideration your individual investment objectives so consult with your own financial adviser before making an investment decision. Investing includes certain risks including loss of principal.

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